MNI: Volkswagen Pay Rises Seen Lagging Peers-Insiders
MNI (LONDON) - Pay rises to be agreed between German industrial union IG Metall and Volkswagen will struggle to match those recently awarded by other major firms in the metalworking sector, two sources told MNI, while a third official said European workers could be poorer under a Trump presidency as the negative growth effects of tariffs bite into wages.
IG Metall last week secured wage increases of 5.5% over 25 months for around four million employees at firms including Mercedes-Benz, BMW, Siemens and Thyssenkrupp, with a separate deal currently being negotiated at troubled car manufacturer Volkswagen.
The union had sought a 7% rise, but settled for 2% from April 1, 2025 and 3.1% from April 1, 2026. Next year’s hike falls to around 1% after a one-off EUR 1500 payment for 2024 drops out, although this will be partially offset in February with payment of EUR600. Some 200,000 trainees will also receive an added EUR140 per month.
“It remains to be seen whether the outcome of the wage negotiations can be transferred to Volkswagen,” one person close to discussions said. “Until now, it has always been customary for the results of the collective labour agreement to be transferred to the Volkswagen Group. This also applied in years when Volkswagen was doing better than the industry as a whole.”
Lower pay deals in Germany’s car industry will be a key factor for the European Central Bank, as it gauges the pace of monetary easing while aiming to achieve its 2% inflation target. German negotiated pay settlements jumped 8.8% from a year ago in the third quarter, the highest increase since 1993, the Bundesbank said on Tuesday.
CHINA COMPETITION
The VW deal will not just be about pay rises, but saving factories and jobs in the face of sluggish vehicle sales and reduced demand for German machinery from China, said a former union official with extensive experience of top-level talks. (See MNI INTERVIEW: German Car Makers Have 5 Yrs To Change-Suedekum)
"When it comes to Volkswagen you need to notice that the pay-level is higher than in the overall IG Metall deal. So even if this year’s VW-deal would be weaker, a VW-worker will still earn more than a Mercedes-worker."
Werner Eichhorst, Senior Researcher at the IZA Institute for Labour Economics in Bonn, agreed.
“Already we have seen proposals to close down some plants and cut wages substantially, and there may have to be further concessions from the unions in exchange for greater employment stability,” he said.
“They may have to use short-time work, although that is to some extent a public scheme and not really part of collective agreements. If it comes to plant closures, there will be additional negotiations with those people who are being made redundant. I would expect the Work Council of Volkswagen to try to save as many jobs as possible, and for those who cannot be saved to find something like a golden parachute or subsidised form of holiday or retirement package.”
The IG Metall deal represents a “responsible and reasonable” solution for millions of workers at some of Germany’s biggest producers and exporters, said Andrew Watt, General Director of European Trade Union Institute (ETUI) - albeit one that could set the tone for pay settlements across Europe.
“Wage policy in Europe generally is currently encountering difficulties: having to deal with the recent inflationary surge, now largely subsided, and the consequent hit to real wages, while labour markets are mostly tight. But the economic outlook is darkening and imponderable risks loom, notably, from the election of Donald Trump.”(See MNI INTERVIEW: German Economy "Stuck," Top Economist Says)